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Study of Existing Supply Chain of UJAS and the Feasibility Study of
Distributing Agricultural Inputs through the Village Level Service Centers
Promoted by UJAS in the Mandla District of Madhya Pradesh
Authors
Arti Mishra
Rukshana Praveen
Reza Mohammad KhanSumeet Kumar Pandey
Host Organization
Udyogini, Jabalpur, M.P.
Faculty Guide
Prof. Alok De
A REPORT SUBMITTED IN THE PARTIAL FULFILLMENT OF
THE REQUIREMENTS FOR MASTERS IN RURAL
MANAGEMENT
School of Rural Management
Kalinga Institute of Industrial Technology (KIIT) University
Bhubaneswar, Orissa, India
September 2009
Management Traineeship Segment (MTS) I
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Approval Page
SCHOOL OF RURAL MANAGEMENT, KIIT UNIVERSITY
Bhubaneswar
The MTS Report of
Arti Mishra
Rukshana Praveen
Reza Mohammad Khan
Sumeet Kumar Pandey
Candidates for the degree of MBA Rural Management
Are hereby APPROVED
Prof. Alok De
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Executive Summary
Title Of The Project: Study of existing supply chain established by UJAS and checking the
feasibility of distributing agricultural inputs through the Village Level Service Centres
promoted by UJAS in the Mandla district of Madhya Pradesh.
Host Organization: Udyogini, Jabalpur, Madhya Pradesh
Project Location: 30 Villages of Mandla and Jabalpur Districts of Madhya Pradesh
Project Period: 6th
July to 6th
September 2010
Objectives of the Project:
To understand the supply chain of retail products and procured commodities
promoted by Udyam Jagran Sansathan (UJAS) and find out the problems in itsoperation
To conduct a feasibility study for the business of distributing agri-inputs and related
services through village level service centres (VLSCs) of UJAS
o To estimate the demand for agricultural inputs and related services in the
target villages
o To assess the market condition of the agriculture inputs and services i.e. to
find out the potential competitors and suppliers
o To suggest business model/supply chain for the agriculture inputs and services
in the target villages
Methodology:
To achieve the objective of understanding the supply chain promoted by UJAS, the primary
data was collected by:
Household surveys of 10 villages by 20% sample size where universe is a village and
survey unit is one house hold
The primary data was also collected by structured interviews of 10 VLSCs
entrepreneur, Focus group discussion at 10 study villages
For feasibility study of distribution of agriculture inputs and related services through VLSCs:
Primary data was collected by farmer household surveys with purposive random
sampling, taking 25% sample size the data was collected from 20 villages.
The other source of primary data was structured interviews of competitors at local
market centers, and distributor interviews
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The secondary data was collected on agriculture scenario in Mandla district, MP and
fertilizer consumption from World Wide Web and some of the valuable informations
were also provided by the organization and the project functionaries
Findings and Analysis:
VLSCs and CLSCs are owned by UJAS. VLSCs are the Village Level Services through
which the Cluster Level Service Centers (CLSCs) sell retail products as well as procure the
commodities from the villages. VLSCs are operated by a woman entrepreneur selected from
the villages and get the required training by UJAS through Udyogini School of the
Entrepreneurship (USE). CLSCs are the centers which acts like a wholesale distributor and
coordinate the operations of all the VLSCs.
Although VLSCs appreciate Udyoginis initiative, there is a general dissatisfaction
among VLSCs about the CLSCs offering, in particularly location, assortment,
opening time, CLSC operator knowledge, commodity procurement and pricing
mechanism.
The supply chain is supply driven rather than demand driven. The CLSCs are product
centric not customer centric.
We also found that at organisational level there is lack of goal and planning for the
VLSCs, unclear product definition, poor book-keeping and lack of value addition for
both retail products and procured commoditites.
For the feasibility study of agriculture inputs and related services, after research and analysis
it is concluded that the business of distribution of agricultural inputs and farm equipments on
lease is not feasible due to the following reasons:
Insufficient demand for agricultural inputs and services at villages;
The demand analysis also shows that investment in the agriculture and related
services is low in the villages;
Financial analysis shows that business is not financially viable and sustainable,
Geographical and physical conditions of the villages like low soil depth, poor soil
quality, lack of irrigation facilities and infrastructure.
Recommendation
For Supply Chain of UJAS:
Proper implementation of 4Ps should be followed in the operational areas of VLSCs.
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Variety, quality and quantity of the products offered by the CLSC should be increased.
VLSCs would like to see more variety in their retail products, since villagers demand for
these products, like medicines, soils, soap, oil etc.
Operators knowledge about the prices in market should be increases so that he will beable to advise and support the women when needed.
Our research shows that women are motivated to improve or expand their business. In
order to be able to do this, the women would like to see that UJAS provided them with
credit facilities. Bookkeeping of Sales, procurement, stock, costs should be maintained.
In order to reduce the operational cost of CLSC and to save the opportunity cost of
VLSCs, a mobile van concept could be implemented which would provide all the retail
products at the doorsteps of VLSCs. This would also be beneficial for the VLSCs
operators in reducing their transportation cost and might also increase their loyalty.
For feasibility of distributing agriculture inputs and services:
As the business is not financially viable and sustainable, the organization should not invest in
this business. They should expand the network of VLSCs which would help them to access
the market more which means to fulfill more demand.
The organization should also be engaged in promotion of some livelihood development
activities and skill/ capacity building of the people so that their purchasing power can be
increased. This would help the organization in two ways:
Building repertoire with the community which will help the organization in their
future interventions.
Once the purchasing power of the community increases any intervention of the
organization would be positively responded.
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Acknowledgment
In preparing this report a considerable amount of thinking and informational inputs from
various sources were involved. We express our sincere gratitude to everyone who contributed
towards making this report possible.
First of all we would like to thank dignitaries of Udyogini, Mrs. Vanita Vishwanath, CEO,
Mr. Arvind Malik, COO and Mr. Sandeep Mishra, Business Development Service Manager,
for giving us the guidelines for the successful completion of this report. We would like to
thank our reporting officer, Ms. Ketaki Narkar for her valuable support and feedback.
We would also like to thank all our respondents for their response without which this study
could not be possible.
We also take a special mention of faculty of KSRM, Prof Alok De for his valuable inputs.
Thank You
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Table of Contents
Contents
1. Introduction................................................................................................................................. 12
1.1. Organization Overview: ..................................................................................................... 13
1.2. Project Overview: ............................................................................................................... 14
1.3. Rationale of the study: ........................................................................................................ 14
1.4. Objective of the study: ........................................................................................................ 15
1.5. Scope of the Study:.............................................................................................................. 15
1.6. Designated Project Area:.................................................................................................... 16
1.7. Limitations of Study: .......................................................................................................... 16
2. Methodology ................................................................................................................................ 17
2.1. Sample Design and Sampling Method: ............................................................................. 18
2.2. Survey Design:..................................................................................................................... 18
2.3. Data Collection .................................................................................................................... 18
2.3.1. Product data collection ............................................................................................... 18
2.3.2. Process data collection ................................................................................................ 18
2.4. Data Analysis ....................................................................................................................... 19
3. Literature Review ....................................................................................................................... 20
4. Analysis and Findings................................................................................................................. 24
4.1. Findings of study of supply chain analysis of UJAS ............................................................ 24
4.3. Demand analysis of agriculture inputs and related services: .................................................. 32
4.4. Inferences from the Field Study: ....................................................................................... 34
4.4.1. Land Holding Pattern:................................................................................................ 34
4.4.2. Land Irrigation Pattern.............................................................................................. 35
4.4.3. Major crops production and area under crops ........................................................ 35
4.5. Demand estimation of Agriculture inputs in the village.................................................. 36
4.6. Demand estimation of Farm equipments on lease (Agriculture Services) ..................... 38
4.6.1. Ranking of the Villages according to Consumption Urea and DAP....................... 39
4.6.2. Ranking of the villages for Farm equipment on lease Utilization: ......................... 39
4.7. Market Analysis .................................................................................................................. 40
4.7.1. Target Market ............................................................................................................. 40
4.7.2. Market Size.................................................................................................................. 40
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4.7.3. Products and Services ................................................................................................. 41
4.7.4. Competitor Analysis ................................................................................................... 41
4.7.5. Strength and Weakness of Competitors: .................................................................. 41
4.8. Technical Analysis .............................................................................................................. 42
4.8.1. Technical analysis for the business of agricultural inputs and related services .... 42
4.8.2. Technical analysis for the business of agricultural inputs products only: ............. 43
4.8.3. Marketing Strategy:.................................................................................................... 44
4.9. Inferences from Distributor Interviews: ........................................................................... 44
4.10. Minimum Requirements for License: ........................................................................... 45
4.11. Financial Analysis ........................................................................................................... 46
4.11.1. Financial analysis for the agricultural inputs products and related services:....... 46
4.11.2. Financial analysis for the agricultural inputs products: ......................................... 49
4.12. Socio-Economic Analysis ................................................................................................ 51
4.12.2. Advantages of the Project to the Community: ......................................................... 52
5. Conclusion ................................................................................................................................... 54
6. Recommendation......................................................................................................................... 55
7. References.................................................................................................................................... 56
8. Annexure...................................................................................................................................... 57
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List of Tables
Table
No.
Description Page
Table 1 Basic Information (MP) 32
Table 2 Land Use and Agriculture in MP 34
Table 3 Per Capita Agriculture Production 34
Table 4 Land Holding Pattern 35
Table 5 Total and Average Demand of Agri-Inputs in Sample Villages 37
Table 6 Consumption Pattern of Seeds 38
Table 7 Farm Equipment on Lease Utilization 38
Table 8 Ranking of Villages According to Consumption of Urea and DAP 39
Table 9 Ranking of Villages According to Utilization of Agri-Inputs Services by HHs 39
Table 10 Total and Average Demand of Agri-Inputs 40
Table 11 Technical Analysis for the Business of Agri-Inputs Products and Related Services 40
Table 12 Technical Analysis for the Business of Agri-Inputs Products Only 43Table 13 Distributor Analysis for Fetilisers 43
Table 14 Distributor Analysis for Pesticides and Herbicides 45
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List of Figures
Figure No. Description Page
Fig 1 Phases of the Project 17
Fig 2 Enterprise Model of UJAS 27
Fig 3 Working Model of UJAS 29
Fig 4 Map of Mandla District 32
Fig 5 Land Use Classification 33
Fig 6 Land Holding Pattern in Sample Villages 35
Fig 7 Land Irrigation Pattern 35
Fig 8 Major Crops and Production 36
Fig 9 Estimated Demand of Agricultural Inputs and Services 37
Fig 10 Consumption Pattern of Seeds 38
Fig 11 4Ps and its Utilization in the Project 44
Fig 12 Productive Cycle of Time Saved 52
List of Abbreviations
BDS Business Development Service
UJAS Udyam Jagaran Sansthan
WEG Women Entrepreneur Group
VLSC Village Level Service Center
CLSC Cluster Level Service Center
GMT Grassroots Management TrainingTEST Training of Enterprise Support Teams
WEMTOP Womens Enterprise Management Training Outreach Program
FMCG Fast Moving Consumer Goods
DAP Di-ammonium phosphate
MOP Muriate of Potash
NBS Nutrient Based Fertilizer Subsidy
ICCO Interchurch Organisation for Development Cooperation
IFFCO India Farmers Fertiliser Cooperative Limited
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1. Introduction
Rural retail chain in India is not a new concept. When organized retail first made its presence
felt in rural India, it wasnt a pure retailing operation targeting the rural masses. Companies
like DSCL and Godrej who had significant agri-business interests, set them up to meet the
needs of farmers in a stores catchments area. A typical agri-input store would have a
catchment area of around 100 villages spread over 20-25 kms. While organized retail centred
on these stores, unorganized retail revolves around the local village shop and the haat. Shops
are usually present in villages with a population of more than 500 people. They stock more
product categories than what similar urban shops would, but there isnt much variety offered
within a category. The rural retail now accounts for over one-third of the market for most
durable and non-durable products.
Agricultural inputs are also one of the major products which have been in the spotlight for a
long time in the agri- business stores such as DSCLs Hariyali Kisaan Bazaar Chain and
Godrej Agrovets Aadhaar. Udyogini has tried to replicate the same model of these agri-input
stores model but in a rather small scale. Madhya Pradesh has unique topography, soil and
weather, which is one of the major reasons that the impact of green revolution had been
negligible on the agriculture sector of the state. Udyogini wants to tap this potential and to
venture more into this business wanted to do a feasibility study of the same.
As part of the Management Traineeship Segment, the major objective was study of existing
supply chain established by Udyam Jagaran Sansthan (UJAS), identify problems in its
operation and checking the feasibility of distributing agricultural inputs through the Village
Level Service Centres (VLSCs) of the supply chain of UJAS in the Mandla district of
Madhya Pradesh. A study in both financial and operational aspects of different opportunities
was carried out to understand the various perspectives for the initiatives undertaken by
Udyogini. In order to identify challenges for the organization in current and future context
different concepts that were learnt in the classroom were utilized. The period of the study was
from the 6th of July to the 6th of September 2010.
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1.1. Organization Overview:
Udyogini - means woman entrepreneur. Udyogini, the organization, works with poor women
to improve their skills as producers and their knowledge of the markets they operate in, so as
to ensure long-term returns
Udyogini, an NGO set up in 1992, has been working for the capacity building of poor women
through micro-enterprise development and its management. Udyogini was set up to co-
ordinate and facilitate management training for womens groups at the grassroots under the
World Bank Institute funded Womens Enterprise Management Training Outreach Program
(WEMTOP). This was a three-year participatory action learning project aimed at
strengthening the capacity of intermediary NGOs to deliver management training to poor
women micro entrepreneurs. The training program consisted of Grassroots Management
Training (GMT) carried out for women producers and the Training of Enterprise Support
Teams (TEST) for the trainers of GMT. In 2002, as a result of a strategic planning process,
Udyogini made changes in implementing strategy, deciding to initiate programs to engage
directly with women producers at the grassroots.
Back in the early 1990s, when Udyogini was established, the focus on microenterprise
management training was innovative at a time when even microcredit was a new idea.
Udyogini took an early lead in the domain by motivating smaller NGOs towards
microenterprise in their portfolio of programs for poverty alleviation for women. It enabled
NGOs, through a program of sustained support comprising training for enterprise awareness,
management and counseling, to move into developing microenterprise programs and having
staff with orientation to microenterprise. The NGOs that have grown and now have
established microenterprise programs such as URMUL, SURE and LUPIN in Rajasthan;
NIPDIT and Samanwita in Orissa and ADITHI in Bihar are distinguished alumni of Udyogini
enterprise motivation and management training.
Its intervention at Mandla district, M.P began in 13 villages to support around 200 women.
They work in two clusters namely Babaliya and Bakori at Mandla district. By the end of
2005, Udyogini worked with nearly 1200 women from 60 villages.
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1.2. Project Overview:
As part of the business development service, Udyogini has established a rural retail chain in
the form of Village Level Service Centers (VLSC) by imparting training and skill
development to women and also providing financial support to open VLSC and enhance their
livelihood. The VLSCs are linked with their cluster counterpart known as Cluster Level
Service Centers (CLSCs), CLSCs are working as wholesaler by providing the retail products
to the VLSCs and procuring the commodities from them. Although the organization is
expanding in terms of opening up new VLSCs but the profit is not increasing in the same
proportion therefore the organization is willing to find out the problem in the supply chain
and take required step to resolve it.
The operation area of the organization at district have agriculture as their primary occupation
by looking up this as an opportunity to sell agriculture inputs and related services through
VLSCs and thus increase both profitability and loyalty of the VLSCs entrepreneur,
Udyogini desires to have the feasibility study for the distribution of the agriculture-inputs and
farm equipments on lease through Village Level Service centers (VLSC) and to develop a
sustainable business model for the same. By this the organization not only wants to
strengthen the women entrepreneurs who are operating the VLSC but also help the farmers at
their agriculture activities with keeping the business interest.
1.3. Rationale of the study:
Even though the numbers of the VLSCs are increasing in past few years, the profitability is
not increasing proportionately thus there is a need to appraise the situation of the supply
chain to identify the problems. For the feasibility study of the distribution of the agriculture
inputs and related services the rationale lies behind primary occupation of the state and the
project area. Though the contribution of the primary sector, which includes agriculture, to the
total Net State Domestic Product is gradually coming down, agriculture is still the mainstay
of the state economy, as about 71% of the population is still dependent on agriculture. Thus it
clearly state that agriculture is the major livelihood activity in the region but still it contribute
least in the GSDP and NSDP of the Madhya Pradesh.
The Mandla District, our area of study is also representing the same picture. The major
constraints in the low agriculture productivity in the region are as follows
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Fragmented and small land holdings.
Low soil depth poor soil condition and Rain fed agriculture.
Traditional agricultural practices (lesser utilization of fertilizers, pesticides,
herbicides, traditional agricultural tools and techniques). Limited availability of agriculture input and services.
Other challenge lays in the heterogeneity of demand and spread of the rural villages
which results in poor connectivity with agriculture market.
Thus there is need of understanding the demand of agricultural inputs and related services of
the people in the region and based upon this develop a business model/supply chain to fulfil
their needs at their own villages that too at fair prices. This can help them to increase the
productivity in near future.
1.4. Objective of the study:
The study is focused to find out the problems in operations of UJAS after understanding their
supply chain and assess the feasibility of the distribution of agriculture inputs and related
services in the target villages. The long term goal of the study is to increase the profitability
of CLSCs, VLSCs and the agricultural productivity in the study area. To achieve this goal
following objectives have been defined:
To study the supply chain of the UJAS and find out the problems in its operations
To estimate the demand for agricultural inputs and other related services in the
targeted villages
To find out the potential competitors and suppliers for the business
To develop business model/supply chain for the agriculture inputs and services in the
target village
1.5. Scope of the Study:
The information, suggestions and opinions made can help in strategic planning for
developing the business plan for the distribution of the agriculture inputs and other related
services to increase the productivity in long term. The primary data collected regarding
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agriculture demand, market analysis, competitor analysis and distributor interviews at
sample villages and systemic knowledge generated by this would result in the creation of a
resource for other future studies. The academic study that arises from the project would
provide a model for similar work elsewhere.
1.6. Designated Project Area:
For the Supply chain analysis the study was conducted in 10 villages of Babaliya and
Bakori clusters of Mandla district of Madhya Pradesh.
For feasibility study of distribution of the agriculture inputs and farm equipments on
lease through VLSCs the study was conducted in 20 villages of Babaliya, Niwas and
Maneri clusters of Mandla and Jabalpur districts of Madhya Pradesh.
1.7. Limitations of Study:
The time period was not sufficient for studying the different dimensions and details which
would have been more beneficial.
As some of the villages are not in the operational areas of the organization, lack of basic
information about village caused difficulty in data collection.
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2. Methodology
Fig 1: Phases of the Project
Phase 1:
The phase 1 of the project consisted of the background study on agricultural inputs used in
Madhya Pradesh, the demographic features and agricultural pattern. It includes detailed
discussion with the staff of Udyogini and based on the discussion and background study the
questionnaires were developed for primary data collection.
Phase 2:
The phase 2 of the project consisted of the field work for the data collection from the
respondents. Various statistical tools were applied to analyze the data. The report was
prepared on the analyzed data.
Phases
Phase 1
(BackgroundStudy)
Discussion WithUdyogini Staff
SampleDesign
QuestionnaireDevelopment
Phase 2
DataCollection
DataAnalysis
ReportWriting
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2.1. Sample Design and Sampling Method:
For supply chain analysis random sampling was done. The house hold survey was done by
taking sample size of 20 percent of the households of the 10 study villages. The feasibilitystudy of distribution of agriculture inputs and related services was done in purposive
sampling which was done by dividing into non-overlapping groups of farmers who own land
and non-farmers; the sample size was 25 percent of the farmer households of the villages.
The respondents were randomly selected based on their availability and willingness to
participate in the survey. The farmer households of the 20 villages of Maneri, Babaliya and
Niwas clusters were the universe for the study with one farmer as unit of the study. The
purpose of the survey was conveyed to the farmers before starting the survey.
2.2. Survey Design:
For primary data collection for supply chain analysis and problem identification,
questionnaires were designed for household surveys and VLSCs entrepreneur interviews.
The checklist for focus group discussion was also designed. For feasibility study three
questionnaires were designed in order to get information from the stakeholders. First
questionnaire was designed for the farmers who use any kind of agricultural inputs and
services; the second questionnaire was designed for competitor analysis to find out the
potential competitors and the third questionnaire was designed for the structured interviews
of distributors of Mandla and Jabalpur districts to find out the potential suppliers.
2.3. Data Collection
Since the research involved analysis on both the product and the process, the data was
collected for both.
2.3.1. Product data collection The data on product was collected from potential
customers. The data was collected through both questionnaire and discussion
based methodology. The data here was collected to know about the preference
and usage of farmers/ consumer towards agri-input products/ retail products and
their perceived demand.
2.3.2. Process data collectionThis data was mainly collected on what the ongoing
process was and how it could be improved. For supply chain analysis and
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problem identification data was collected by structured interviews of the VLSCs
entrepreneur and FGD at assigned villages. Interview of CLSCs operator was also
taken to understand the operation and problems faced. For feasibility study this
data was first collected from retailers and government cooperatives of the study
area; how agri-inputs were availed from district level distributor and how do they
sell it to farmers, what was the potential demand. Second, the data was collected
from district level distributors about how the supply chain works.
2.4. Data Analysis
The data collected was analyzed using various statistical tools after tabular and graphical
summarization of the raw data. After the data analysis the final conclusion were drawn and
these conclusion along with personal observations at field formed the basis for
recommendations.
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3. Literature Review
With over 12 million retail outlets, India has one of the highest densities of retail outlets in
the world with one retail outlet for approximately 90 persons. Retailers inspired by the Wal-
Mart story of growth in small town America are tempted to focus on smaller towns andvillages in India. However, a careful analysis of the town strata-wise population, population
growth, migration trends and consumer spend analysis reveals a very different picture for
India
(www.researchandmarkets.com/reports/236028/indian_retail_industry_strategies_trends_an
d.pdf).
After a long spell of shortages, which shackled consumer buying for decades, retail is
becoming India's new mantra. While the retailing industry itself has been present through
history in our country, it is only the recent past that has witnessed so much dynamism.
We have entered the 21st century at a time when the demography of our population is
changing significantly to drive organized retail growth. India now has a large young working
population with a median age of 24. The number of nuclear families in urban areas is
growing fast. Then there is the increase in working women population. Add to these the
emerging opportunities in the service sector. Lifestyle habits are shifting from austerity to
complete self-indulgence and Indians are now unapologetic about spending lavishly on non-
essential goods such as luxury watches, cars, and hi-tech products.
India can be said to have entered the second phase of retail growth when there is high-speed
growth. There are retail chains like Tata's Westside, Pantaloon's Big Bazaar and Rahejas'
Shoppers' Stop, to name a few, along with global players such as McDonald's and Benetton,
trying to tap country's vast potential. Bringing all these under one roof are mega malls such as
Lifestyle, Fun Republic and Big Bazaar ( Business World,http://www.tsmg.com/download/article/TSMG_Tata_Review-June_2006.pdf).
Now, top names in international malls such as Marks and Spencer and Mango are also eying
the Indian market. It is only later that the retailing scene will move to the other phases when
the fruits of rapid growth will result in economies of scale and greater efficiency leading
finally to consolidation through mergers and acquisitions. Thus, retailing in India has a very
long haul ahead.
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In India for a long time a large chunk of retail outlets were grocery shop. This pattern had
been changing in recent years, in urban and rural markets.
Of late, India's largely rural population has also caught the eye of retailers looking for new
areas of growth. A slew of supermarket chains, including those of the Tata and ITC, are set to
storm the rural areas of the country as corporate realize the huge potential of the untapped
market. ITC launched the country's first rural mall 'Chaupal Sagar', offering a diverse product
range from FMCG to electronic appliances to automobiles, to fertilizers in an attempt to
provide farmers a one-stop destination for all of their needs. Companies such as Godrej and
DCM Shriram Consolidated are launching `one-stop shops' for farmers and their
communities. Godrej Agrovet, for instance, has planned to set up 1,000 Aadhaar stores across
rural India by the end of 2010. DCM Shriram has set up 302 rural/semi-urban utility marts
until June, 2009. Positioned as a one-stop shop, the Hariyali Kisaan Bazaar Chain caters to a
variety of farmers' needs by providing access to retail banking, fertilisers and other
agricultural inputs, LPG outlets and even a motorcycle showroom.
Fertilizer is key input in enhancing crop production. Fertilizer consumption and food grain
production is closely correlated. Presently fertilizer contributes about 50% to the total
increase in food grain production. Increasing pressure of population and shrinking land
resources demand for vertical expansion of agriculture where the role of fertilizers will
further increase. At the present level of nutrition, additional 150 million tons of food grain
production has to be achieved to feed almost 1.5 billion people by 2040. This estimate does
not include demand for animal feed, which will rise due to depleting grasslands. Thus, the
crusade of higher production of food grain has to continue with increased vigour using
fertilizers along with the other sources of plant nutrients.
(http://www.indiaretailing.com/news.aspx?topic=1&Id=3830)
The Union government has approved the Nutrient Based Fertiliser Subsidy (NBS) plan with
effect from April 1, 2010. This has a positive sentimental impact on share prices of fertiliser
companies. Under the new policy, the companies can fix retail fertiliser prices. However the
urea prices would be increased by Rs 483 per tonne or 10 per cent. This would lead to a
spiraling of fertiliser prices.
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The hike in urea prices is not going to impact the bottom-line or EPS of fertiliser companies
as extra 10 per cent will go from farmers pocket directly. However, looking at the shift in
policy, its a big positive for the industry.
Fertilisers are sold at government-fixed prices, which are lower than their costs of production
or import. The difference is met through subsidy. The NBS does away with maximum retail
price. It proposes to replace the current system of giving subsidy to the industry with direct
assistance to farmers. (The Economic Times)
Compared with last year, there is an increase of about Rs 4,000 crore in the plan allocation
for agriculture in this Budget. Also, flagship schemes such as the Rashtriya Krishi Vikas
Yojana have been given greater support. The Centre has cut fertiliser subsidy by Rs 3,000
crore from last year's allocation as part of its strategy to switch to a nutrient-based subsidy
policy. The Budget has made no substantial allocation for irrigation even as the farming
sector has suffered due to drought.
The move to decontrol prices of all non-urea fertilisers with effect from April 1, as part of the
changeover to a nutrient-based subsidy (NBS) regime, is supposed to help lessen the Centre's
subsidy burden.
But if the new rates of subsidy applicable on different fertilisers from the coming fiscal are
compared with their existing levels, a somewhat different picture emerges. In most products,
the subsidy payable to fertiliser companies will actually go up.
Di-ammonium phosphate (DAP), where manufacturers and importers are currently given a
concession of Rs 10,245 a tonne in return for selling at a controlled maximum retail price
(MRP) of Rs 9,350 a tonne.
In the event of decontrol, companies would technically enjoy the freedom to set their own
MRPs. Notwithstanding that, the Centre has decided to enhance the subsidy they would
receive on DAP sales by 59% to Rs 16,268 a tonne.
Likewise, the subsidy on mono-ammonium phosphate (MAP) has been raised by 104% and
that on triple super phosphate (TSP) by 38.5%. Earlier, there was no subsidy on ammonium
sulphate (AS), whereas now it has been fixed at Rs 5,195 a tonne, benefiting Gujarat State
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Fertilisers & Chemicals and Fertilisers and Chemicals Travancore. (Harish Damodaran, The
Hindu Business Line, New Delhi, Date: Feb, 2010)
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4. Analysis and Findings
4.1. Findings of study of supply chain analysis of UJAS
Business Development Service (BDS)
BDS are a very important means of supporting the development of micro, small and medium
sized enterprises (MSMEs), which are known to create employment, generate income and
contribute to economic development and growth. Employment and income generation are
particularly important as far as impoverished rural areas, vulnerable communities and groups
are concerned. The intervention was grounded in the year 2003 and 60 villages of
Narayanganj Block was chosen for the intervention. The Block was chosen for its tribal
concentration and the potential of NTFP production as per the findings of the value chain
study. The five stages described from the standard operational model for Udyogini are:
Enterprise motivation and management awareness for grassroots women
(Formation of Women Enterprise Groups and orientation through Grassroots
Management Training)
Creation of grassroots business development service providers and entrepreneurs
(Advanced training and refreshers at the Udyogini School of Entrepreneurship)
Enterprise promotion and incentives for producers and market players (value
chain creation, product and market research and linkages, enterprise investment
models and financial linkages, social services)
Ownership and scale up through systems and institutions (producer companies,
private companies, non-profit societies)
Expansion and outreach (services to other NGOs and clients; replication of model
in other areas)
Udyam Jagran Sansthan (UJAS)
With a mandate to organize tribal women producers in the form of an institution so that they
take up the ownership and build their capacities and skills to undertake income generating
activities, an association of women NTFP collectors called Udyam Jagaran Sansthan
(UJAS), meaning light, was formed. UJAS was registered in 2005 under the M.P. Societies
Act, 1973. It is a federation of Women Enterprise Groups (WEGs) by virtue of their
involvement in enterprises at individual as well as on group basis. In 2008 the organization
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UJAS Governance
The leaders of UJAS were previously acting as BDSPs and were providing paid services such
as maintenance of accounts, forming new groups, training groups and also technical services
such as running trade centers and processing centers. These women are selected through a
definite selection process and then groomed to provide business development services in
group and enterprise management. Since the producers have been organized as UJAS, these
women are in the process of developing themselves as leaders at the village, cluster and
organizational levels and hand over the technical functions to paid employees and manage
their work. This is being carried out in a phased manner. As a first step, the President is
developing her leadership skills to the extent that she can provide direction and build the
capacity and groom other leaders from amongst the members.
UJAS Operations
The enterprise model of UJAS revolves around the cluster-level service centers (CLSCs),
also termed as Business Growth Centres. These centers are currently doing procurement and
aggregation of commodities collected and produced by the members and supplying the Retail
products to the VLSCs. CLSCs are also assign the work of value addition in terms of
processing, drying, grading and selling the produce. These Cluster Level Centres (CLSCs)
are linked with 20 existing Village Level Centres (VLSCs), with the goal of institution of 500
more VLSCs till 2013. One VLSC is being instituted for every one village. In addition to the
trading centers, UJAS also has processing centers, chiefly two oil mills and one dal-cum-
flour mill out of which only the flour mill is in operation. These centers help in the primary
processing of commodities like oilseeds, pulses, maize and wheat, thus ensuring better
margins for the enterprise.
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Fig 2: Enterprise Model of UJAS
Cluster Level Service Centres (CLSCs)
Cluster Level Service Center is like a whole sale agency for the VLSC from where they have
to purchase the products. These CLCs are run by the UJAS itself. The CLSCs are just
operational for the three days a week. CLSC charges 4% of Transaction cost or transportation
cost on each product to the VLSC. This 4% is operational cost of the CLC. E.g.: if the
wholesale price of the Parle-G biscuit is Rs.40/- then they give this Parle-G biscuits to the
VLSC at Rs.4.16/-. There are two CLCs, at Babaliya and Bakori clusters. The prices for the
procurement commodity/ NTFP are decided by the CLSCs, and they dont have any
mechanism for the prices speculation they depend on their instinct and some time they talk to
local trader for the same.
The CLSCs of Babaliya and Bakori are collection centers working under the purview of
UJAS. The latter uses the channel of the CLSCs for social and financial intermediation and
the delivery is carried out by the VLSCs operating at the village level. All the VLSCs bring
their collect from their respective operating village to theCLSCs of Babaliya and Bakori andbuy there retail products from CLSCs.
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The business processes of procurement, weighing and payment for the produce are the
responsibility of the VLSCs stationed at the CLSCs.
Village Level Service Centres (VLSCs)
The VLSCs are the agents of UJAS operating at the village level and are instrumental in
actualizing the action plan of the intervention through social and economic intermediation.
The procurement of the produce is carried out by the VLSCs at the village level, which work
on commission basis at the rate of INR. 25 per market day of any produce procured/collected.
The VLSCs are supposed to meet the critical business volumes by procuring the produce
from villages, irrespective of the members of the WEGs. However, no threshold or minimum
quantity is defined for VLSCs to sell to the CLSCs. At the village level, the produce is
collected either by VLSCs or the members of WEGs directly from the villagers or members
of the group and sold to the VLSCs at the price quoted by the BDS unit (Market Intelligence
wing of Udyogini). This is usually the block level market price. Thus the villagers get fair
price at their doorstep. UJAS did a business in 26 commodities during 2007-08 which
included cereals (paddy), Jatropha and NTFP. The total business volumes included
procurement of about 76,461 kg, to the tune of INR 9, 45,789 and sale, along with the
previous years stock (94,036.6 kg), to various market players to the tune of INR 11,28,285 .
NTFP sales accounted for 17.2 per cent of the total sale amount that year. The business
turnover of UJAS yielded profits of over 1.5 lakh. Since the UJAS is a not for- profit outfit,
the profits were used for meeting the shortfall of the various processing units and for
procurement ofMahua in the 2008 season. The trading of NTFP was primarily done at
Jabalpur and Mandla level.
VLSC also acts as a local retailer selling more than 30 FMCG products in the village.
UJAS/CLSC provides the VLSC with an initial FMCG products worth Rs 10,000/- with a
security of Rs 3000/-. The loan is interest free but the VLSC has to return the money in 3
years. The CLSC purchase the Retail product at whole sale rate from either Mandla or
Jabalpur and charge 4% transaction cost to the VLSC.
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Fig 3: Working Model of VLSCs
Findings
Problems with Procurement Business:
a. Poor pricing mechanism: Though Udyogini always offers fair price for the NTFP
and commodities (at Mandla Mandi rates), but according to the VLSC operators there
is a difference in the price of the NTFP and commodities as compared with the local
haats and traders.
b. High Dependency on CLSCs: VLSCs have to be dependent on the CLSCs at the
time of purchasing commodities from the villagers. If there is large volume (say) 100
Kgs, she has to inform the CLSC about the volume of NTFP and cash required and if
someone comes from the CLSC then only VLSC could procure that NTFP or
commodity as they dont have the required cash.
c. Lack of proper Storage facility: Most of the VLSCs also dont have the proper
storage place for storing the commodities and NTFPs if in case they have to storethem. Some of the VLSCs also complained that sometimes the CLSC operator doesnt
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come and take the NTFPs when they had bought it on their behalf. As a result, with
poor storage capacities, majority of procured goods gets spoilt due to rodents and
moisture.
d. High Opportunity Cost for VLSCs: The VLSC earn Rs. 20/ quintal of commodity/
NTFP for cleaning the commodity and then selling it to CLSCs, which is purchased
by the villager either directly or through agents who are again member of WEG. The
agent gets Rs. 25/ quintal commission on the commodity. If the agent is not involved
then the VLSC earns that money. The entire procedure of cleaning grains like paddy
and wheat consumes whole day of VLSC operators which they could have utilized for
any other more economically benefitting activity like wage labour which is about INR
70 in their villages. Thus there is a high opportunity cost for them to be involved in
this minimal value addition to commodities or NTFPs.
e. No Community Mobilization: After FGDs and the household surveys we came to
know that at some of the villages, people do not know that VLSCs also procure
commodities and NTFPs.
f. Seasonal and Selected Procurement by CLSCs: The CLSCs dont buy all types of
the commodities of the villages; they only buy some selected commodities that too on
the seasonal basis.
g. Presence of Strong Competitors: In all the villages majority of the people sell their
commodities and NTFPs to traders directly or at a local haat, they consider the
VLSCs as the last option for selling their commodities/ NTFPs as they think that they
cannot only bargain for good prices at haatbut also can build their goodwill with the
traders who help them at thick and thins of life.
Problems with Retail Business:
a. Transaction Cost: The CLSCs charge 4% of the selling price as transaction cost each
time something is bought from them by VLSCs. According to the VLSC
entrepreneurs they dont have to pay such transaction cost if they buy the same thing
from independent wholesalers.
b. Price Discrimination: CLSCs dont follow the market price fluctuation. If the price
of a particular commodity decreases in the market by Re. 1, it will not be reflected in
the prices of CLSCs. They would still sell the commodity at the same price as before.
c. Poor Location of VLSCs: Most of the VLSCs are not satisfied with location of theshop and they also want better displays, racks and show cases.
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d. Supply Driven Product Line: Most of the VLSC complained that the product line is
supply driven not demand driven. It also came to knowledge from the FGDs that in
spite of the large demand of some essential grocery items the VLSCs dont have them
as the CLSCs dont supply them.
e. No Credit Facilities: CLSCs dont provide the products to the VLSCs on credit but
they can get this facility from any local wholesaler.
f. Inadequate Stock: Most of the VLSCs complained that CLSCs have inadequate
amount of the products and although they have huge product line, it doesnt coincide
with the demand.
g. No After-Sales Services: The CLSCs do not provide with the VLSCs any after-sales
services. For instance VLSCs sold solar lamps with a one year warranty but within 6
months of sales there were complaints regarding the lamps and all the sold lamps
were dumped into the VLSCs and CLSCs did not took back the lamps.
h. Inappropriate Working Hours and Days: The CLSCs are open thrice a week,
which makes the remote area VLSC center operators unable to reach them on the
stipulated time and place. Therefore they buy from other wholesalers operating in the
same area.
i. Distant Location of VLSCs from CLSCs: The VLSCs are generally located in
remote areas and the distance between the VLSCs and the CLSCs is very large
making it hard for the VLSC operators to buy the products and transport it back to the
VLSCs. And they also have to bear the transportation cost.
4.2. Finding and analysis for feasibility study of distribution of agriculture inputs
and related services
A feasibility study is essentially a process for determining the viability of a proposed
initiative and services and providing a framework and direction for its development and
delivery.
A typical feasibility study is done to:
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Verify the community needs for the proposed activity or services and asses the overall
value the same (Demand analysis )
Find out the potential competitors and suppliers (Market analysis)
Determine the technical requirements (Technical analysis)
Determine the cost and benefits (Financial analysis)
Socio-economic analysis
Formulate the delivery options and recommend the most effective delivery strategy
(Business model development)
4.3. Demand analysis of agriculture inputs and related services:
Demand analysis for agriculture inputs and related services was done in two phases. The first
phase was to gain some knowledge about the agricultural scenario in Madhya Pradesh in
which desk research was done, Mandla district and then at the target block of the district.
This phase also included extensive and productive discussion with the organisation staff for
target village identification and questionnaire development.
The second phase was field study to determine the demand of agriculture inputs and related
services at the study villages.
Major findings of demand analysis are as follows:
Mandla District:
Fig 4:Map of Mandla Table 1: Basic Information (MP)
Source: Census 2001
Agriculture:Overview
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Total geographical area: 965,559 hectares.
Net sown area: 23% of total geographical area. Fallow land and land not available for
cultivation accounts for 13% of the total geographical area.
Forest: 60%
Cropping intensity: 149%
Percent of net sown area irrigated: 7%
Main occupation for 87% of all workers in the district is agriculture.
Land holding:
40% of the farmers have very small holdings, avg. 0.45 ha accounting for 7% of the
total cultivated area.
38% of the farmers have relatively large holdings, avg. 4.89 ha accounting for 79%
of the total cultivated area.
Fig 5: Land Use Classification
Source: Human Development Report Madhya Pradesh 2007
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Table 2: Land Use and Agriculture
Source: Human Development Report Madhya Pradesh 2007
Table 3: Per Capita Agriculture Production
Source: Human Development Report Madhya Pradesh 2007
4.4. Inferences from the Field Study:
The field study includes the survey of 20 sample villages to assess the demand of Agriculture
inputs and Farm equipments on lease in the villages. 597 farmer HHs were surveyed with the
sample size of 25% per village.
4.4.1. Land Holding Pattern:
Most of the farmers in the surveyed villages held small land holding, the following table and
graph shows the land holding pattern of the surveyed villages
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Table 4: Land Holding Pattern at Sample Village Fig 6: Land Holding Pattern in Sample Villages
Source: House Hold Survey
4.4.2. Land Irrigation Pattern
The graph shows that only 13% of the total land holding is irrigated, which follows the state
picture of rain fed agriculture with little or no irrigation facilities and use of irrigation inputs.
Fig 7: Land Irrigation Pattern (Source: House hold survey)
4.4.3. Major crops production and area under crops
The two important food grain crops of the region are paddy and wheat, which contribute
about 53 percentage of the total production and 68.34 percentage of the total food grain
production. Pulses collectively contribute about 8.42 percentage of total food grain
production. Along with Paddy, Wheat, and Pulses; Maize and Minor millets are also grown
abundantly in the region. Among non food grain crops oilseeds like Ramtila, Rai, Alsi and
Tilli are cultivated in the region and contribute approximately 5.20 percentage of the total
production.
30%
46%
24%
Land Holding Pattern
Marginal (0-2.5)
Small (2.6-5)
Large (More then 5)
13%
87%
Land Irrigation Pattern
Irrigated Land
Unirigated Land
Land Holding/
Acre
No. of
HHs
Marginal (0 - 2.5) 181
Small (2.6 - 5) 273
Large (More than 5) 143
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At present, about 31.69 percentage of the total cropped area is under Paddy and about 21.25
percentage of the area is under Wheat. The oilseeds are cultivated under 9.11 percentage of
the total cropped area.
Fig 8: Major Crops and Production Source: House hold survey
4.5. Demand estimation of Agriculture inputs in the village
Although the demand of the agriculture input is low still the study villages show the potential
for the agriculture inputs and related services.
The study show that among all the agriculture input urea, DAP and herbicides were mainly
used by the farmers in the villages. About 49% of the farmers used Urea at their fields and
mainly used for the wheat cultivation. DAP is consumed by 31% of the farmers and about 5%
of the farmer use herbicides with the approximately volume of 62.81 liters. Total estimated
demand of the urea in the sample village was approximately 788.33 quintals and that of DAP
was about 334.37 Quintals. Farmers buy urea and DAP mostly from the cooperatives at
subsidized rate or from the market. The purchase from the cooperative depends upon the land
holding. The major constrains for the use of the Urea and DAP by the farmers are
Low fertility and poor soil quality of the land
Farming on steep slopes causes the fertilisers to wash down with the running water
and ultimately rendering the utilization of fertilisers as ineffective
Insufficient irrigation facilities due to geographical location, poor infrastructure andunavailability of irrigation inputs
32%
21%8%5%
1%
6%
3%
4%
8%
7%
1% 4%
0%
0%Major Crops and Production
Paddy
Wheat
Maize
Rahar
Urad
Rai
Ramtila
Masoor
Kodo
Kutki
ChanaBatra
Tili
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Other than Urea, DAP and herbicides, the demand of other agriculture inputs are nominal.
Pesticides and vermi-compost are used by only 4 percent of the farmers. Vermi-compost was
used in the villages where MPRLP was operating and vermi-compost pits were built free of
cost. The use of other fertilizers like MOP, SSP and bio-fertilizers was negligible in this
region as only one farmer of the sample used MOP and bio-fertilizers.
S.No.
Agriculture
inputs and
Services
No. of
farmer
using
Total
Demand
Avg.
Demand
1 Urea 296 788.33 Q 0.68 Q
2 DAP 186 334.37 Q 0.58 Q
3 Vermi-compost 21 81.68 Q 0.99 Q
4 Herbicides 28 62.81 Lts 0.57 Lts
5 Pesticides 19 98.28 Lts 1.32 Lts
6 Paddy Seeds 27 46.02 Q 0.43Q
7 Wheat Seeds 24 51.79 Q 0.55 Q
8 Pulses Seeds 20 13.53 Q 0.17 Q
Table 5: Total and Average Demand of Agri-Inputs in Sample Villages**
**All the analysis has been done on following assumptions:
It is estimated that 80% of households are farmers at the village
Fig 9: Estimated Demand of Agriculture Inputs
Source: House hold survey
65%
28%
7%
Total Estimated Demand of
Fertilisers
Urea
DAP
Vermicompost
39%
61%
Total Estimated Demand of Plant
Protectors
Herbicides
Pesticides
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Fig 10: Consumption Pattern of Seeds Table 6: Consumption Pattern of Seeds
Source: House hold survey
4.6. Demand estimation of Farm equipments on lease (Agriculture Services)
The major farm equipments on lease or agriculture services used in the villages were tractor,
thresher, irrigation inputs like diesel pumps, electric pumps, and spray pumps. 25.96% of
surveyed farmers used thresher on rent, 12.9% farmers rented diesel pump, 5.7% electric
pump, 9.21% of the farmers used tractors on rent and 4.69% take spray pump. Only 1.17% of
the farmers surveyed take plough on rent. The use of these equipments depended upon the
resource availability and geographical location of the villages. Most of the time the farmers
hired these equipments from co-villagers and also from neighboring villages or market
centers like Babaliya, Niwas, Pipariya, Dhanpuri, Kundum. The rent mainly depends on the
place of hiring. In all surveyed villages we observed that the rent on thresher is paid in kind
i.e. on an average 10 Kgs per quintal.
Agriculture Inputs Total HHs % of HHs Avg. Rent (Rs)
Electric Pump 34 5.70% 30/ HrDiesel Pumps 77 12.90% 50/ Hr
Kerosene Pumps 1 0.17% 20/ Hr
Tractor 55 9.21% 328/ Hr
Plough 7 1.17% 50/ Day
Spray Pump 28 4.69% 20/ Day
Thresher 155 25.96% 160/ Q
Soil Testing 16 2.68% 0Table 7: Farm equipment on lease Utilization
Seeds Total Estimated Demand
Paddy 46.02 Q
Wheat 51.79 Q
Pulses 13.53 Q
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4.6.1. Ranking of the Villages according to Consumption Urea and DAP
The village were ranked according to the Average consumption of the Urea and DAP at the
villages by the farmers.
Village name Ranking Village name Ranking
Mehgaon 1 Chakdehi Rayyat 8
Lehsar 2 Bandariya 9
Amdari 3 Jamgaon 10
Lohari 3 Melhari 11
Mehra Sivani 3 Banar 12
Mawai Maal 4 Chhapra 13
Salepani 4 Malthar 14
Katangi 5 Tervani 15
Katang Sivani 6 Mawai Rayyat 16
Majhgaon 7 Sukhram 17
Table 8: Ranking of villages according to Consumption of Urea and DAP
4.6.2. Ranking of the villages for Farm equipment on lease Utilization:
The villages are ranked according to the Number of the Farmer HHs using/ hiring the farm
equipments at the villages. Farm equipments are Tractor, Thresher, Diesel Pumps, Electric
Pumps, and Spray Pumps.
Village Name Rank Village Name Rank
Majhgaon 1 Malthar 9
Lehsar 2 Tervani 10
Amdari 3 Mawai Rayyat 11
Mehgaon 3 Katangi 12Jamgaon 4 Melhari 13
Banar 4 Katang Sivani 13
Salepani 5 Chhapra 14
Bandariya 6 Lohari 14
Mehra Sivani 7 Chekdehi Rayyat 15
Mawai Maal 8 Sukhram 16
Table 9: Ranking of villages according to utilization of Agri.-input services by HHs
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4.7. Market Analysis
4.7.1. Target Market
The market segment for agriculture inputs and related services are the farmer of the 20
surveyed villages which include farmers from the Babaliya, Niwas, and five villages of
Maneri cluster of the Mandla and Jabalpur district. The Maneri cluster is not the operational
area of the organization. Most of the villages are remotely located and approximately 5 - 6
Kms away from the nearest market/weekly haats. Although the organization is willing to start
the business in villages where it has VLSCs, it also is looking to expand to other remote
villages of the clusters.
Major market centers for the surveyed villages were Niwas, Babaliya, Pipariya, Maneri,
Dhanpuri and Kundum.
4.7.2. Market Size
In the absence of related secondary data or information and reliable primary information it
was assumed that total estimated demand was the market size for the study. The market size/
demand for agriculture inputs and farm equipments on lease are as follows.
S.No. Agriculture inputs Total Demand Avg. Demand/ HH
1 Urea 788.33 Q 0.68 Q
2 DAP 334.37 Q 0.58 Q
3 Herbicides 62.81 Lts 0.57 Lts
4 Pesticides 98.28 Lts 1.32 Lts
Table 10: Total and Average Demand of Agri-Inputs
S.No. Agriculture Equipments/Services Total HHs Avg. Rent (Rs)
1 Electric Pump 34 30/Hr
2 Diesel Pumps 77 50/Hr
3 Kerosene Pumps 1 20/Hr
4 Tractor 55 328/Hr
5 Plough 7 50/Day
6 Spray Pump 28 20/Day
7 Thresher 155 160/Q
Table 11: Farm Equipment on Lease Utilization
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B) Weakness
1. Not proper implementation of policies and plan
2. Black Marketing
3. Demand is more than supply
Private Retailers
A) Strength
1. They can sell the products in loose and at credit
2. Good customer relations
3. Save transportation cost as they dont have to sell the product in villages
4. Agri-inputs and equipments centers are located at the market centres
5. Updated pricing strategies and mechanism
6. Diversified product portfolio as most of the retailers take it as a side business and
the retailers who deal in this business only have diversified product portfolio
along with good market penetration
B) Weakness
1. Most of the retailers do not have any license except the one who are engaged in
the business of agriculture inputs and equipments only
2. Most of the surveyed villages are remotely located
3. Most of the retailers do not have warehouses
4.8. Technical Analysis
The technical analysis is done assuming that the business is for the time period of five years
as the market conditions would change with time and the business would need other
requirements. The analysis is done for two approaches which are as following:
Agricultural inputs products and related services
Agricultural inputs products only
4.8.1. Technical analysis for the business of agricultural inputs products and related
services:
The essential requirements for the business of agricultural input products and related services
are enlisted below:
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Technical Inputs/ Requirements
Warehouse (capacity @ 800 sq feet)
Licenses for Fertilizers, Pesticides & Herbicides
Tractors with Trolley & Plough (1)
Diesel Pump set of 5 H.P (5)
Electric Pump set (2 H.P) (2)
Spray Pumps 15 Liters (20)
Thresher (2)
Weeder (40)
Hand Harrow (20)
One Manager
Two Agri Input Expert (for Research, Development and Training)
One Accountant
Two Supervisors
One Driver
One Watchmen
One Peon
Table 12: Technical Requirements for the Business of Agri-Input and Related Services
4.8.2. Technical analysis for the business of agricultural inputs products only:
Technical Inputs/ Requirements
Warehouse (capacity @ 800 sq feet)
Licenses for Fertilizers, Pesticides & Herbicides
One Manager
One Agri Input Expert (for Research, Development and Training)
One Supervisor cum Accountant (One for Warehouse)
One Watchmen
One Peon
Table 13: Technical Requirements for the Business of Agri-Inputs
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4.8.3. Marketing Strategy:
Fig 11: 4Ps of Marketing
The 4Ps of marketing here should be utilized in the optimum way i.e. product, promotion,
place and price. Here also the same rule applies for the marketing strategy of distribution of
agri-inputs and related services. The organization should keep in mind these components so
as to devise an effective and efficient market competitive strategy. The pricing of the agri-
inputs can be derived by taking into account the prevailing price of the agri-inputs and arrive
at a selling price which would be beneficial to both the organization as well as the farmers at
large. The other P i.e. place or location are the 20 villages of Babaliya, Niwas and Maneri
clusters. The major products to be given attention here are urea, DAP, herbicides and
pesticides and also farm equipments. For the last P i.e. promotion, the organization should
engage in promoting their idea of distribution of agri-input products through VLSCs to the
community through various modes such as field demonstration, training and FGDs.
4.9. Inferences from Distributor Interviews:
The nearest big markets of agri-inputs and services are Mandla and Jabalpur of which
Jabalpur is the bigger of them. It is a hub of big distributors of agri-inputs and services in the
whole Mandla and Jabalpur. Dhanpuri is also a market for agri-inputs but not of that
magnitude. The details of the potential distributors for the business are described as followed:
Price derived bypricing strategy
Villages ofBabaliya, Niwas
and ManeriClusters
FieldDemonstration
Training
FGDs withfarmers
Urea, DAP
Herbicides
Pesticides Farm Equipment
on Lease
Product Promotion
PricePlace
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Distributor Analysis Fertilizers
Distributor'
s Name
Location Can
Providethe Req.
Quantity
Selling
price ofUrea
Selling
Price ofDAP
Transportation Cost Buyb
ackFacilit
y
Purohit
Traders
Mandla YES Rs.
270/50
kg Bag
Rs. 515/ 50
kg Bag
Will be borne by Distributor in
off season or when Company
give the Free on Road (FOR)
YES
Aggarwal
Brothers
Jabalpur YES Rs.
278/50
kg Bag
Rs. 518/ 50
kg Bag
Have to borne by UJAS or
Udyogini
NO
Madhu
Fertilizers
Pvt. Ltd.
Jabalpur YES Rs.
270/50
kg Bag
Rs. 515/ 50
kg Bag
Will be borne by Distributor in
off season or when Company
give the Free On Road (FOR)
NO
Table 14: Distributor Analysis for Fertilizers
Distributor Analysis Pesticides & Herbicides
Distributor'
s Name
Location Can Provide
the Req.
Quantity
Discount Offered
on Pesticides
Discount offered
on Herbicides
Buyback
Facility
Krishi
Jagat
Dhanpur
i
YES Up to 7% on MRP Up to 10% on
MRP
NO
Aggarwal
Brothers
Jabalpur YES Up to 7% on MRP Up to 10% on
MRP
NO
Table 15: Distributor Analysis for Pesticides and Herbicides
4.10. Minimum Requirements for License:
In order to sell fertilisers it is necessary to obtain a license to sell from the District
Development Authority (DDA). In order to obtain the license the basic requirements are:
Map of the warehouse
Agriculture expert
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4.11.1.2. Variable Cost* Analysis for Five Years:
Variable Cost Analysis for Five years
Ye
arTranspor
tation
cost
Insur
ance
Premi
um
for
Tract
or
Insura
nce
Premiu
m for
Wareh
ouse
Electri-
city Bill
Cost of
Urea
Cost of
DAP
Cost of
Pest.
Cost of
Herb.Total
0 0 0 0 0 0 0 0 0 0
1 161841 6645 452 6000 108000 87550 4944 21428 396860
2 168315 4652 484 6120 115560 93679 5290 22928 417026
3 175047 3954 517 6242 123649 100236 5660 24533 439839
4 182049 3361 554 6367 132305 107253 6057 26250 464195
5 189331 2857 592 6495 141566 114760 6481 28088 490169
TOTAL 2208090
*Assumptions:
It is assumed that the transportation cost may increase by 4% per annum
It is assumed that there will be minimum four trips for the transportation of agri-inputproducts from CLSCs to VLSCs per annum
It is assumed that the procurement of agri-input products will increase by 7% as our
sales will rise by the same percent per annum
It has been assumed the warehouse insurance premium will rise by 7% as the
procurement will also increase by the same percent per annum
It has been assumed that the tractor insurance premium will decrease by 30% in first
year and thereafter it will decrease by 15% per annum
It has been assumed that the electricity bill will increase by 2% per annum.
4.11.1.3. Sales* Analysis of CLSC
CLSC to VLSC
Particulars Rate Quantity Amount (INR)
Urea Urea @ Rs 280/ 50kg Bag 200 Quintals 112000
DAP DAP @ Rs 526/ 50kg bag 85 Quintals 89420
Pesticides
Bayer 1ltr @ Rs 218 12 ltrs 2616DuPont 1 ltr @ Rs 228 13 ltrs 2964
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Herbicides
PI 1ltr @ Rs 1078 11 ltrs 11858
Bayer 1 ltr @ Rs 1048 11 ltrs 11528
Tractor Rs 330 per hour 633 hrs 204712.2
Diesel Pump Set Rs.40 per hour 7025 275380
Electric Pump Set Rs.40 per hour 3200 125440
Thresher Rs.100/quintal 3040 Quintals 297920
Weeder Rs.9/day 90 days 32400
Hand Harrow Rs.18/day 120 days 43200
Spray Pump Rs 11/ day 702 days 308880
TOTAL SALES (1st Year) 1518318
*Assumptions:
It is assumed that we will meet 25% of the demand
It is assumed that our pump sets will run for 5 hours for 5 days by one person.
Weeder is used by 40 persons for 90 days @ Rs 9/ day
Hand harrow is used by 20 persons for 120 days @ Rs 18/ day.
Assumption is made that 2% of sales would be given to VLSC on electric and dieselpump sets, tractor rent, thresher rent
4.11.1.4. Sales Flow* Analysis Year Wise:
Sales
Year Sales (in INR)
0 0
1 1518318
2 1624600
3 1738323
4 1860005
5 1990205
*Assumption: It has been assumed that our sales will increase by 7% per annum
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4.11.1.5. Financial Viability Analysis for CLSC
FINANCIAL VIABILITY ANALYSIS OF AGRI INPUTS AND SERVICES
YEAR 0 1 2 3 4 5 TOTAL
Total Fixed Cost 933250 612000 612000 615250 612000 612000 3996500Total Variable Cost 0 396860 417026 439839 464195 490169 2208090
Total Cost (A) 0 1008860 1029026 1055089 1076195 1102169 6204590
Total Sales (B) 0 1518318 1624600 1738323 1860005 1990205 8731452
EBIT = (B-A)
-
933250 509458 595574 683233 783810 888036 2526862
Tax @ 2% pa 0 10189 11911 13665 15676 17761 69202
EAT = (EBIT-
Tax)
-
933250 499269 583663 669568 768134 870275 2457660
The Break Even Point is Rs. 5349273, which is not coming in the five years of the business.
The Net Present Value (NPV) of total Cost is Rs. 4027825.94 and the Net Present Value
(NPV) is Rs. 1730767.38.
4.11.2.Financial analysis for the agricultural inputs products:
4.11.2.1. Fixed Cost Analysis for Five Years:
Fixed Cost Analysis for Five Years
Year
Warehouse
Rent Licensing Management Cost
Maintenance
Cost TOTAL
0 0 3250 0 3250
1 60000 0 300000 6000 366000
2 60000 0 300000 6000 366000
3 60000 3250 300000 6000 369250
4 60000 0 300000 6000 366000
5 60000 0 300000 6000 366000
TOTAL FIXED COST FOR FIVE YEARS 1836500
All the fixed cost would remain constant for the five years as the warehouse would be on
contract for five years.
4.11.2.2. Variable Cost* Analysis Year Wise:
Variable Cost Flow Analysis for Five Years
Year Transportation
cost Electricity Bill
Cost of
Urea
Cost of
D.A.P
Cost of
Pesti.
Cost of
Herbi.TOTAL
0 0 0 0 0 0 0 0
1 7575 4200 108000 87550 4944 21428 233697
2 7878 4284 115560 93679 5290 22928 249619
3 8193 4370 123649 100236 5660 24533 266641
4 8521 4457 132305 107253 6057 26250 284842
5 8862 4546 141566 114760 6481 28088 304302
TOTAL Variable Cost for Five Years 1339101
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*Assumptions:
It is assumed that we will meet 25% of our total estimated demand.
It is assumed that our business will grow by 7% per year.
It is assumed that the transportation cost may increase by 4% per annum.
It is assumed that there will be minimum four trips for the transportation of agri-inputproducts from CLSCs to VLSCs per annum.
It is assumed that the procurement of agri-input products will increase by 7% as oursales will rise by the same percent per annum.
It has been assumed the warehouse insurance premium will rise by 7% as theprocurement will also increase by the same percent per annum.
It has been assumed that the electricity bill will increase by 2% per annum.
4.11.2.3. Sales Flow* Analysis Year Wise:
Sales Flow Analysis of CLSC for Five Years
Year Sales
0 0
1 230386
2 246513
3 263769
4 282233
5 301989
*Assumption: It has been assumed that sales will increase by 7% per annum.
4.11.2.4. Financial Variability Analysis:
FINANCIAL VIABILITY ANALYSIS OF AGRI INPUTS TOTAL
YEAR 0 1 2 3 4 5Total Fixed Cost 3250 366000 366000 369250 366000 366000 1836500
Total Variable Cost 0 233697 249619 266641 284842 304302 1339101
Total Cost (A) 0 599697 615619 635891 650842 670302 3172351
Total Sales (B) 0 230386 246513 263769 282233 301989 1324890
EBIT = (B-A) -3250 -369311 -369106 -372122 -368609 -368313 -1850711
Tax @ 2% pa 0 0 0 0 0 0 0
EAT = (EBIT-Tax) -3250 -369311 -369106 -372122 -368609 -368313 -1850711
We can see from the above table that in none of the year we are making any profit.
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4.12.2.Advantages of the Project to the Community:
Following advantages can be there:
Time can be Saved
The time consume by men can be saved if there would be the facility of agri inputs at their
door step in a reasonable cost which they can afford.
Saved Time can be Utilised for other Economic Activities
The opportunity cost which lies in this plus the social cost to the village is huge. This time
can be utilized by the people to do other jobs like working in NAREGA and other Govt.
projects which will surely enhance their livelihood needs.
Fig 12: Productive Cycle of Time Saved
The saved time can be use for productive work that can be an additional source of income for
the family. The Major portion of the income is consume by the family either rest of the
income can be save and then invest in infrastructure like ,hand pump, well, house, vehicle,
home appliances etc to get a good quality of life which will further give them an additional
time to do some productive work.
Or some part of the income can be spend for paying to the services which can give them good
quality of life. These services can be safe drinking water, electricity, bio- gas connection,
sanitation etc. These good qualities of life help them to save their time which they can further
utilize in any productive work.
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The productive cycle of chain keeps on running until the saved time through good quality of
life is not utilizing by the person for productive work, increase expenditure on consumption
or give the preference to saving instead of spending on services or investment on
infrastructure
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5. Conclusion
After research and analysis it is concluded that the business of distribution of agricultural
inputs and farm equipments on lease is not feasible due to various reasons such as:
The geographical conditions (poor soil quality, low soil depth, lack of proper
irrigation facilities, etc) of the villages are not suitable for extensive agriculture.
Therefore the demand of the products and services cannot be adequately increased.
The purchasing power of the farmers is not sufficient to invest in the scientific
agricultural practices. It is evident from the fact that most of them are dependent only
on agriculture and mono-cropping is prevalent in the region. Their secondary
occupation comprises of agriculture labour and wage labour.
The demand analysis shows th